Gender pay gap reporting has become a legal requirement for all UK organisations with 250 employees or more. Private and voluntary sector organisations also have the option of including a narrative statement alongside their gender pay gap figures, outlining the reasons behind them and the actions they are taking to close it.
This factsheet explains what the regulations are, what a gender pay gap report is, what it might include, and what benefits an organisation can derive from completing one. It shows why HR should be involved in compiling a gender pay gap narrative report, and explains the role the CIPD has taken in helping to shape this new reporting responsibility. It also covers possible enforcement measures that may be taken in the future.
Gender pay gap reporting isn’t just a compliance exercise; it brings transparency to, and focuses attention on, important gender equality issues that need addressing, for example inequality in career progression opportunities and occupational segregation. Publishing gender pay gap data provides an ideal opportunity for organisations to examine the impact of their people management and development practices on equality of opportunity at work.
As well as reflecting on what’s being rewarded, why and how, HR should also look at the influence of their people practices such as recruitment and selection, learning and development and diversity and inclusion and polices. Such analysis will assist employers in creating a narrative for their stakeholders to explain their gender pay gap and an action plan of how they will address it, and we urge employers to produce both of these to support sustainable change. If HR creates a compelling narrative of intent and takes tangible steps to address their gap, their organisations should be more attractive for employees, customers and investors.
What is gender pay gap reporting?
The gender pay gap reporting regulations require larger organisations in the UK to publish statistics on the pay gap between their male and female employees, measured by hourly pay and bonuses, and to report on the proportion of male and female employees in each pay quartile (see below for the legal position). The intention behind the regulations is to produce a sea-change in the way organisations respond to gender pay inequality by encouraging them to take action to narrow the pay gap over a period of time. This isn’t just about reporting a set of figures.
Although not obligatory, the government expects the majority of employers to include a narrative report alongside their gender pay gap figures (see below). Gender pay gap reporting should not be confused with reporting on equal pay. There is no obligation to report on equal pay. Male and female employees already have a contractual right to be paid equally for performing equal work. A gender pay gap may indicate unequal pay within an organisation, but it doesn’t necessarily do so: a gender pay gap should not be taken as evidence of unequal pay.
Nationally the gender pay gap encompasses the labour market as a whole. Both external factors, such as the availability of childcare across the country, the proportions of men and women graduates in the supply chain, and internal factors, such as the structure and implementation of pay and bonus systems, and the provision of flexible working opportunities, can all affect the gender pay gap, both at a national level and at the level of the individual business.
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What is narrative reporting?
Organisations are required to publish their gender pay gap annually, based on data collected on the same date each year, accompanied by a signed statement verifying its accuracy. Private and voluntary sector organisations also have the option of including a narrative report explaining the context and causes of any gender pay gap the data reveals, the actions being taken to close the gap, and how employees will be involved in this process.
A narrative report provides an organisation with an opportunity to explain the context in which its gender pay gap occurs, both from an organisational and from a wider labour market perspective, and, as far as possible, the causes behind any gender pay gap shown up by the snapshot data. The narrative could also explain any anomalies for that particular year, such as changes in the timing of bonus payments.
A narrative does not have to be lengthy (500-750 words will do). An organisation does not need to include all of its diversity and inclusion policies – only those that are relevant to closing the gap. It is helpful to set out what actions the organisation is taking to address the gap over what time period, so that future narratives can report on any progress made towards narrowing the gap. Organisations that have had a significant gap for a long time may want to focus on what resources are being allocated to closing it and what progress they expect to make in the short term.
The narrative could cover a range of issues, including:
- the main drivers behind the reward strategy (for example, economic climate, organisational performance/budgets)
- an explanation of the purpose behind any bonus schemes (for example, rewarding good performance) and reasons why bonuses may be lower among women (for example, because of the distribution of part-time work among the workforce)
- the reasons for an under- or over-representation of women in certain roles and at certain levels of seniority (for example, labour market and societal factors)
- a statement of the organisation’s commitment to fairness and gender equality, and to addressing any barriers to opportunity that may be contributing to its gender pay gap.
The report should be signed off by a director or someone of equivalent authority.
Why HR should be involved in writing the statement
Publishing a gender pay gap report annually can help identify where action to close the gap is most needed and what progress is being made Although addressing the gender pay gap will benefit the economy as a whole, it also has benefits at an organisational level. Organisations that are diverse, measured both by gender and other characteristics, are more productive and make better financial returns. Both men and women expect to be treated equally at work, and this includes closing the gender pay gap. Organisations that fail to do so, and which fail to maximise women’s contribution will, sooner or later, acquire a reputation as a poor employer.
HR professionals already know that what gets measured, gets managed. Understanding why a gender pay gap exists can take time, but the process of unpicking the factors involved will put businesses in a stronger position to tackle them, and help them to build an effective action plan to reduce the gap. A thought-through narrative can turn an ‘uncomfortable truth’ into a real opportunity to demonstrate an organisation’s commitment to closing the gender pay gap, and provide the starting point for addressing the issues that have led to the gap’s existence.
What organisations can gain from gender pay gap reporting
Simply because an organisation has a larger gender pay gap compared to others does not mean that it is a ‘bad’ employer. Organisations vary in terms of their provision of non-pay benefits, such as contributions to employee pensions, which means that rankings on the basis of pay alone might not accurately reflect relativities in total reward. There will be employers that promote diversity with the use of inclusive practices, yet report a relatively large gap, due to broader factors such as the particular sector or type of work or because of the local labour supply. Conversely, employers that do not have particularly inclusive work practices may be able to report a relatively low gender pay gap.
A narrative can help an organisation contextualise its headline gender pay gap data and develop appropriate remedial steps. Transparency is a crucial first step, but if the data is considered in isolation, an employer’s gender pay gap figures will still only provide a superficial overview of what is happening to men and women’s pay in that organisation, but do little to help understand why it is happening. An understanding of the underlying causes of a gender pay gap goes beyond how women and men are paid, and extends to how an organisation’s working practices, and possibly culture, negatively affect women’s employment prospects and opportunities for progression.
A narrative is an opportunity to showcase an organisation’s plans for tackling the gender pay gap. A positive statement of intent will help the business attract and retain employees, engage with its stakeholders, and build reputation and brand.
A report might include, for example, a recruitment and selection approach tailored to redress an under-representation of women in more senior roles, or describe how an organisation is opening up flexible working arrangements, not only for less senior and lower paid roles, but the most senior positions too.
The CIPD conducted a survey of over 1,000 employers and HR professionals in 2016 to find out the extent of gender pay gap analysis being carried out by organisations, and of action taken to address gender inequality.
The survey found that:
- Only 28% of all employers, and 34% of larger organisations (with 250 or more employees) conducted any analysis of the difference between men and women’s pay.
- Of those not currently analysing gender pay differentials, only 7% of larger organisations planned to do so in the next 12 months.
- Action to promote equal opportunities within the last 2 years, or planned for the next 12 months, was limited and ad hoc in nature.
- Of those large employers planning action to improve gender balance, most (13%) were focusing on improved flexible working opportunities, 11% were looking at more inclusive recruitment practices, and 13% at mentoring to help women progress to more senior roles.
The legal position
The Equality Act 2010 (Gender Pay Gap Information) Regulations 2017, in force from 6 April 2017, require private and voluntary sector employers with 250 or more employees in the UK to report their gender pay gap, based on pay data captured at 5 April each year (the ‘data snapshot date’). The report must contain:
- the difference between the mean and median hourly pay rate of male and female employees
- the difference between the mean and median bonuses paid to male and female employees
- the proportion of male and female employees receiving a bonus payment
- the proportion of male and female full-time employees in each pay quartile.
Organisations must publish the report on their own website, and on the government’s gender pay gap reporting website, within a year of the snapshot date, along with a signed statement from a director or the chief executive confirming the report’s accuracy. The report must remain on the website for at least three years and all organisations covered by the regulations should have published their first reports by 4 April 2018. Private and voluntary sector employers can include a narrative explaining why the pay gap exists and what they plan to do to close it. A companion site, the gender pay gap viewing service, enables the public to view all of the published reports.
Similar reporting requirements apply to public authorities, including government departments, the armed forces, local authorities, and schools. The ‘snapshot date’ is 31 March each year and first reports should have been published by 30 March 2018.
How will the regulations be enforced?
Failure to report amounts to a breach of the Equality Act 2010, and will lay an organisation open to the possibility of enforcement action by the Equality and Human Rights Commission (EHRC).
The EHRC has consulted on a strategy for enforcing the regulations. While the EHRC stresses that it will continue to encourage and inform employers, its proposals also include investigating employers who don’t report and possibly pursuing them through the courts, which could lead to unlimited fines for those organisations convicted of acting unlawfully.
What role has the CIPD played?
We have helped shape the gender pay gap regulations since the initial consultation on them in 2015, steering government away from a league table approach towards encouraging narrative reporting, on the grounds that this was more likely to lead to positive and sustainable action on closing the gap. Statistics collected nationally show wide variations in the gender pay gap across sectors, and we’ve argued that not explaining factors behind this – such as occupational segregation, and early career choices among women – could actually deter women from exploring opportunities in areas striving to correct an inherent gender imbalance, such as science and engineering.
Our Guide on gender pay gap reporting offers suggestions on how employers might close the gap; looks at the reporting requirements and at how good communications will help explain you to your gender pay gap figures to the wider world.
In our response to a 2016 consultation on draft regulations, we recommended that government guidance to employers should help them take a step by step approach to understanding their own gender pay gap, and the kind of practical measures needed to close it, and stressed the need for detailed guidance on what information should be included in the narrative that would help employers understand their pay gap data.
We’ve stressed that it’s how government and organisations act on the basis of the data they collect that is just as important as collecting the data itself. With the Government Equalities Office, we’ve produced Gender pay gap: closing it together, a toolkit for employers on the actions they can take to close the gap in their workplace.
We also responded to the EHRC’s recent consultation on proposals to enforce the regulations, we agreed that taking action against non-compliant organisations will encourage more to report.
What is the CIPD doing about its own gender pay gap?
Our purpose – championing better work and working lives – involves leading by example. We published our own first gender pay gap report in November 2017.
As well as the figures we’re required to report, we also set out what we’ve done over the last year to reduce the risk of pay inequality within our organisation. This included a salary review resulting in a narrowing of the pay range within job families, and adjustments to the bonus system. Action points for the future are:
- Building gender pay gap analysis into annual pay reviews, and into tools used to monitor pay at all stages from recruitment through to progression within the organisation.
- Exploring means for attracting more men into the organisation to create a more even gender balance.
- Actively encouraging flexible working in every role and at every level.
Useful contacts and further reading
Books and reports
ACAS and GOVERNMENT EQUALITITES OFFICE. (2017) Gender pay gap reporting: make your calculations.
HOUSE OF COMMONS LIBRARY. (2018) The gender pay gap. Briefing paper.
ONS DIGITAL. (2017) How do the jobs men and women do affect the gender pay gap? 6 October.
CHARLTON, J. (2016) Gender pay gap: protect your firm's reputation. Employers' Law. May. pp14-15.
Closing the gender pay gap. (2017) IDS Employment Law Brief HR. No 1062, February. pp9- 17.
FARAGHER, J. (2018) The gender pay gap – how to calculate it, explain it and eradicate it. People Management. 25 January.
SAVAGE, M. (2018) Top-paid men outstrip women by 4 to 1, shock figures reveal. The Guardian. 10 March.
CIPD members can use our online journals to find articles from over 300 journal titles relevant to HR.
Members and People Management subscribers can see articles on the People Management website.
This factsheet was compiled by CIPD staff and edited by Sheila Wild. The CIPD viewpoint was written by Charles Cotton.
Sheila Wild: Freelance equalities adviser and writer
Sheila was for many years the Director of Employment Policy at both the Equal Opportunities Commission and the Equality and Human Rights Commission, where she led work on equal pay and the gender pay gap. For the past six years she has run EqualPayPortal, the independent website aimed at equipping people to understand and deal with equal pay issues. In 2017 she wrote the CIPD's guide on gender pay gap reporting, and is currently advising a number of clients on their gender pay gap reports.
Charles Cotton: Performance and Reward Adviser
Charles directs the CIPD's performance and reward research agenda. He has recently led research into: how employers can help improve their employees’ understanding of their personal finances; how front line managers make and communicate reward decisions to their employees; how employers manage the risks around reward; how private sector employers can build the business case for workplace pensions; how employees form their attitudes to pay; and how the annual pay review process can become more strategic.
He is also responsible for the CIPD’s public policy reward work and has given evidence to select committees on banking pay, redundancy awards as well as responding to various consultations, such as on pensions, retirement and MPs’ expenses.
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